Start-ups advised of Costco opportunity

The early success of discount superstore Costco in Australia should inspire start-up retailers rather than intimidate them, according to a retail expert.

US discount brand Costco has revealed that its first Australian store, in Melbourne, made $8.9 million in sales and membership fees in its first two weeks of operation.

The opening of the Melbourne store in August saw long queues of people keen to pay the annual fee of $55 to $60 to give them access to a large range of discounted goods. A further store in Sydney is set to be built.

The arrival of Costco has raised fears that small retailers could be squeezed, but a leading retail expert has pointed out that small firms overseas have benefited from Costco’s presence.

“If you try and have a transactional model and go head-to-head with Costco without offering anything different then you will struggle and will probably be obliterated,” Brian Walker managing director of the Retail Doctor told StartupSmart.

“But if you look at the rest of the world, small retailers that have positioned near Costco have done well, not just because of the foot traffic, but because they have been different.”

“There is a fundamental opportunity for small firms to concentrate on differentiation, to learn the things that Costco doesn’t do well. That means focussing on relationships with customers, having a defined range and using social media.”

“Retailers can then use that relationship to link back to the community. There is a market for a value driven offering (but) in the last year or so, brands such as Louis Vuitton have done well as they are a high value brand and they do it well.”

“Always look at what customers need and differentiate yourself.”